The paper trail that led detectives to the door of a New Jersey-based prostitution service began when they noticed a stream of strange bank payments flowing from the accounts of the governor of New York state, Eliot Spitzer. Tax officials raised the alarm after noticing odd transactions during what they told the New York Times were routine inspections. Their initial suspicion was that the governor may have been involved in some form of corruption, bribery perhaps or manipulation of political funds.

But once the FBI was brought in, investigators quickly followed the money back to the prostitution business. Agents met a former prostitute working for the Emperors club VIP, which they believed to be the service used by Spitzer, and recruited her as an informer.

With her intelligence, the FBI persuaded a judge to allow them to wiretap communications between the Emperor's club and its prostitutes and clients. More than 5,000 telephone calls and text messages, and 6,000 emails, were intercepted. An undercover agent also posed as a client.

Agents studied bank documents to reveal the financial tricks used by the Emperors Club to disguise its operations. The club had set up two shell companies in New York - QAT Consulting Group, Inc in December 2004, and QAT International, Inc, in November 2006.

Over the past three years about $1m (£500,000) in takings was moved into the companies' accounts, and in turn about $400,000 was taken out to pay up to 50 prostitutes working in New York, Los Angeles, Miami, London, Paris and Vienna.

When clients expressed fears they would be exposed if police exposed the Emperor's Club, they were reassured the shell companies were legitimate businesses and would not be detected by police.

Spitzer's anxieties about being found out appear to have been the reason he moved large sums of cash between different accounts, as he refused to pay by electronic means. Ironically, it was precisely such activity that alerted officers to his conduct.

Court documents suggest Spitzer paid $4,300 to a prostitute he met at the Mayflower Hotel in Washington on February 13, of which $1,700 was an advance for future services. He also had $500 "on credit".

In an affidavit filed in the Manhattan federal court last week, Spitzer appeared as "Client 9", according to a law enforcement official. Client 9 personally made several mobile phone calls to Emperors Club VIP to arrange a February 13 tryst at a Washington hotel, the official said.

In one wiretapped conversation a call girl phoned her Emperors Club booker to inform her the session with Client 9 went well, and that she did not find the client "difficult", as other prostitutes apparently had, according to the affidavit.

The booker responded that Client 9, sometimes asks the women "to do things that, like, you might not think were safe".

As a further embarrassment, the governor reportedly booked room 871 of the hotel under the name George Fox, a friend of his and a major donor to the New York Democratic party.

The unusual switching of cash between accounts may subject Spitzer to criminal charges. It is a crime punishable with up to five years in prison to try and conceal the purpose and source of transactions.

The allegations of financial improprieties to pay women for sex are particularly poignant for Spitzer, who in his career as prosecutor and then governor for New York state has consistently made a point of fighting high-profile cases against corruption and organised crime. As district attorney of New York state between 1998 and 2006 he cracked at least two prostitution rings.

His hard-line approach to immorality earned him a reputation as Mr Clean. But in recent months he has become embroiled in a string of disputes and scandals, notably "Troopergate" in which his aides used state police to spy on a political opponent